Allowable Expenses: Exactly What Can You Deduct to Lower Your Tax Bill?

The Golden Rule

Before you try to write off your new shoes, you must understand the HMRC definition of an allowable expense. To be deductible, an expense must be "wholly and exclusively" for the purposes of your business.

The Short Answer

You only pay tax on your PROFIT, not your REVENUE.

If you earn £5,000 but spend £1,000 on software and ads, you only pay tax on the remaining £4,000. Lowering your profit legally is the key to paying less tax.

Working from Home

If you work from your kitchen table or a garden office, you can claim a portion of your household bills. There are two ways to do this:

1. Flat-Rate (Simplified Expenses)

HMRC gives you a fixed monthly allowance based on the number of hours you work at home. This is the "lazy but safe" option.

25–50 hours/month: £10
51–100 hours/month: £18
101+ hours/month: £26

2. Actual-Cost Method

You calculate the percentage of your home used for business (e.g. 1 room out of 5) and claim that exact percentage of your rent, heating, and broadband.

Phone, Laptop, & Software

Most digital workers can recover significant amounts of tax by correctly identifying their equipment costs.

The Equipment & Creative Checklist

Laptops & Computers: Usually 100% deductible if used exclusively for business.
Phone Bills: Deduct the calculated business-use percentage of your monthly plan.
Software Subscriptions: Adobe Creative Cloud, Figma, Slack, Zoom, Microsoft 365, and web hosting.
Marketing & Promotion: Online ads (Google/Meta), portfolio sites, and branding assets.

Explore Creative Expenses

In Plain English

What is "Dual-Use Items & Apportionment"?

Be careful with items you use for both work and personal life (like your home broadband or phone). You can only claim the business portion. If your mobile bill is £50/month and 60% of your usage is business calls and client messaging, you can claim £30/month (£360/year) as an allowable expense. HMRC requires a 'reasonable and consistent basis' for your calculation.

Quick Reference: Allowable vs. Disallowable Expenses

Here is how HMRC categorises common everyday expenses under the official Business Income Manual (BIM37000) guidelines:

Expense Item	Allowable?	HMRC Rule & Explanation
Business Travel (Train / Fuel / Parking)	✅ YES	Purely business journeys (e.g. visiting a client or supplier). Regular commute between home and a permanent office is disallowed.
Approved Mileage (45p/mile)	✅ YES	Using your personal car for business trips (up to 10,000 miles/year, 25p thereafter). Use our Mileage Calculator.
Home Broadband & Utility Bills	✅ YES (Split)	The fair business-use proportion of heating, electricity, and internet while working from home.
Everyday Work Clothes / Suits	❌ NO	Disallowed under the Mallalieu v Drummond precedent. You need clothes for basic human warmth and decency, so dual purpose applies.
Protective Clothing / Uniforms	✅ YES	Hi-vis jackets, steel-toe boots, branded merchandise, or actor/performer costumes with zero ordinary street use.
Client Entertaining / Dinners	❌ NO	Specifically barred by UK statute (ITTOIA 2005 s45). You cannot write off taking clients out to meals or drinks.
Subsistence on Business Trips	✅ YES	Food and drink bought during an overnight business stay or unaccustomed travel outside your normal routine.
Accountancy & Tax Filing Software	✅ YES	Subscriptions to FreeAgent, Xero, or QuickBooks and fees paid to accountants for business return preparation.
Interest on Business Loans	✅ YES	Interest and bank charges on genuine business bank overdrafts, loans, and commercial credit cards.

Common Expense Errors Caught by HMRC

Claiming the £1,000 Trading Allowance AND actual expenses: You must choose one or the other per tax year. If your actual expenses are £2,500, claim actual expenses. If your actual expenses are only £200, take the £1,000 flat Trading Allowance.
Claiming personal grocery shopping or home lunches: Lunch at your desk is an ordinary living expense, not a business cost.
Throwing away digital receipts: Keep digital scans or app records of receipts for at least 5 years after the 31 January submission deadline.
Forgetting to record small recurring software charges: Tools like Canva, Notion, GitHub, and domain registrations quietly add up to hundreds of deductible pounds.

Official HMRC Legislation & Sources

Frequently Asked Questions

Only if you are a professional TV reviewer or filmmaker. Unless it is 'wholly and exclusively' for your business, you cannot claim it.

Almost never. HMRC says you'd have to eat anyway, even if you weren't working. The only exception is if you're on an overnight business trip.

Yes. You can either claim 45p per business mile (the easiest way) or claim for the actual fuel and maintenance costs based on the % of business mileage vs personal mileage.

Technically, yes. HMRC can ask for proof of any expense. A photo or digital scan is perfectly fine - you don't need to keep boxes of paper in your attic.

UK Tax Information & Editorial Policy

TaxWiz content is produced for general educational information for UK sole traders, side hustlers, and creators under the 2026/27 tax year legislation (Finance Acts & HMRC internal manuals). We do not provide regulated legal or financial advice. Tax outcomes depend on individual circumstances. For bespoke advice, consult a qualified UK chartered accountant (ICAEW/CTA/AAT). Read our full Disclaimer and Editorial Standards.